Sunday Mirror (Northern Ireland)

Inflation rate: 5 things you should know

Don’t overlook the impact of inflation on wealth

MSCI World

MSCI Emerging Market

Gold Price

UK Property market proxy

Deposit Rate 11.68 9.72 13.45 0.58 0.54 1.58 0.98 10.92 6.25 9.33 3.26 0.19 4.18 2.92

Total return in pounds sterling. YTD is the year-to-date percentage total return. 10 yr(%) is the compound annualised growth rate over 10 years. Deposit rate reflects a typical savings account at £2,500. RPI and CPI are inflation measures.

Ulster Bank is offering a variable savings account of 5.20%pa National Bank of Egypt is offering a 1-year fixed rate of 5.22%pa Isbank Raisin UK is offering a 3-year fixed rate of 4.75%pa Isbank Raisin UK is offering a 5-year fixed rate of 4.75%pa Please check the terms and conditions before depositing your money. If you hold money with a UK authorised bank or building society, you are covered under the Financial Services Compensati­on Scheme up to £85,000 per eligible person, per bank or building society.

If you’re remortgagi­ng: Barclays is offering 4.31% fixed rate until 30/09/2029 at 60% LTV AIB is offering a 4.71% fixed rate until 31/08/2029 at 80% LTV If you’re moving home: Barclays is offering 4.33% fixed rate until 30/09/2029 at 60% LTV Danske Bank is offering a 4.53% fixed rate until 02/07/2029 at 80%

If you’re a first-time buyer: Lloyds Bank is offering a 4.71% fixed rate until 31/08/2029 at 90% LTV Halifax is offering a 5.10% fixed rate 31/08/2027 at

100% LTV

Inflation is back in the news again, but this time for better reasons.

Inflation, as measured by the consumer prices index (CPI), rose by 2.3% in the 12 months to April 2024, significan­tly down from 8.7% 12 months earlier after hitting a 40-year high of 11.1% in October 2022.

It finally looks like inflation is under control. I first wrote about the risks of rising inflation more than two years ago. I felt it was inevitable and profession­al investors and economists should not have been surprised that it increased – although what was surprising for so many was the extent that it increased.

Inflation is a normal part of the economy, and it shouldn’t be feared. However, when it gains momentum, it can spiral out of control, leading to a rapid increase in prices. This is what we have recently experience­d, which led to the cost-of-living crisis that affected everyone.

Inflation and its impact on wealth is often overlooked. I tell my clients that inflation is one of the biggest risks to their money. Why? Because inflation is effectivel­y a constant tax on the value of your pounds and assets, a tax that we all collective­ly pay.

Consider this: since 1989 inflation has averaged 2.8%, which to most people would seem modest.

But this means you would need to achieve at least a 2.8% return on your cash savings and investment­s, after tax and costs, each and every year, to maintain the value of your money.

In other words, you need £183 today to buy the same goods which would have cost you £100 at the turn of the millennium, just because of inflation.

That’s why I advise against keeping excessive amounts of money on deposit for prolonged periods of time. Inflation is like carbon monoxide to your money: it’s a silent killer of wealth creation, of which few people are aware.

So, what’s the solution? The answer lies in investing rather than maintainin­g cash deposits (savings). The MSCI World index, which is a collection of the world’s largest companies in developed countries, has delivered 10.8% per annum average return over the last 20 years for UK investors.

Even after accounting for fees and tax, you’ll comfortabl­y stay ahead of inflation. This is one reason why the

MARKS & Spencer announced a quarterly profit that surpassed expectatio­ns, marking a significan­t milestone with its first dividend payout to shareholde­rs since 2019. The company had been grappling with declining sales and doubts about its future. In 2022, it launched a successful turnaround strategy that included shutting down underperfo­rming stores and ramping up investment­s in food. wealthy get richer during inflationa­ry times: they understand that companies can increase their prices and profits, which helps share values rise.

You too can participat­e and grow your wealth over the next 20 years, even if you start small – but you must start. Now, more than ever, it’s crucial to focus on the importance of investing to combat the negative effects of inflation. The recent high inflation rates serve as a stark reminder of this. For more money and investment ideas, search for The Finance Geeks Podcast Big Save

The surge in demand for chips, essential for powering AI services provided by companies such as Meta and Microsoft, has significan­tly bolstered Nvidia’s revenues. In the last quarter, it reported a whopping $26bn in revenues.

The highest inflation rate globally is Venezuela at a whopping 283%.

In 1950, £100 had the same buying power as £2,860 today!

Deflation is when inflation turns negative, meaning many items get cheaper annually.

To double your money every 10 years, after allowing for inflation you need a return of around 9%pa (assuming 2% inflation). In the 1970s, inflation increased to double figures and reached over 25%.

My son wants to trade shares – should I encourage him?

Bob, Newcastle

This is tricky because it’s unlikely he will make money trading shares over the long term, but hopefully he’ll learn a lesson and decide to invest properly. I suggest using a training account, or paper trading so he learns without losing money and at the same time, invest in a global tracker fund, which will teach him longterm investing.

Send your emails to warren.shute@reachplc.com or tweet @warrenshut­e